Response – Food: The Weak Link

I picked up the Spring 2014 edition of Spirit of Change in a Cambridge coffee shop this Winter and opened up to one of the feature articles, a republishing of Lester Brown’s first chapter in “Full Planet, Empty Plates”. While I am fundamentally aligned with many of Lester’s ideas around true sustainable change articulated through the Earth Policy Institute and numerous books like Plan B, there were some areas in the article that seemed to be a bit misleading, possibly deriving conclusions based on unsound assumptions. Not entirely false ideas or conclusions, but some of the ideas should be put in perspective. Below, I will identify a section of the article and offer my thoughts based on my research.

Lester Brown: “We are entering a new era of rising food prices and spreading hunger.”

Analysis: The graph above is taken from Professor Phil Pardey’s presentation to Stanford University’s Food Security Institute (see below for the full presentation). What is most striking are the levels of volatility over time have in fact decreased considerably to date: in the Roaring 20’s we see real prices for maize, wheat, and soya drop by a factor 4 times greater than the entire change in 2007/2008 only to rise and fall substantially during the Great Depression, again by a factor 6 times greater than 2007/2008; then during WWII, prices continued to rise again until after the war and subsequently fall for three decades until the oil price spikes in 1974 – a spike that was about 3 times the change we saw in 2007/2008; and thereafter a continued suppression of real prices on through the 2007/2008 spike. Putting into perspective the last 100 years of real food prices, the volatility today is moderate (note that rice is not part of this analysis).

*see minute 47:40 for the conversation on commodity price fluctuations

When we include rice in the analysis, the focus is on man-made policies that impact prices. And this impacts some of the ‘poorer’ people in developing countries where 700 million of the 1.1 billion buy rice as their staple food – using upwards of 40% (sometimes 70%) of their incomes to do so. So, in this case, it is not a matter of dwindling reserves, but increasing reserves by one of the largest exporters (see Thailand’s rice buying scheme) and fellow exporters (India, Vietnam, Pakistan) thereby decreasing global supply and raising prices (also in part due to speculative markets in Chicago). But the response should not be to produce more rice to account for this hoarding (reserves are increasing), but to work with farmers to better smooth the excess supply of rice in stock – possibly even considering alternative products as the Vietnamese are proposing.

Lester Brown: “Against this backdrop, it is not surprising that the UN Food Price Index was at 201 in June 2012, twice the base level of 100 in 2002-2004.”

Analysis: Again, at first glance it can be said that prices are twice that of just a decade ago when looking at the nominal figures – which is the value we see the item at any one time. Yet if we were to take an earlier base year before 2002-2004, then we would have an entirely different analysis. For instance, if we compare real prices to 1970 (128.3) or 1980 (129.7) the increase is not as dramatic in terms of real food prices, i.e. in 2012 the real FPI = 161.0. What accounts for the added pressure to households is more related to poverty and the lowering of real wages to the workforce, not food price increases (even though the food budget is significantly more in developing countries as a share of overall household spend).

What should also be noted is that in the past (from 1960 to 1985) real prices were greater than nominal prices, meaning, the difference in quantity could be accounted for by limited global supply and therefore increasing production could be a solid argument; whereas when real prices fall below nominal prices, then these quantities are in fact not deficits in food supply but a result of overproduction or oversupply and governments and speculators intervening in the markets. We should also note that high growth globally may be a factor and that inflation in particular is key to understanding this divide. Note however, that average ‘world’ inflation over the same 10-year period in Brown’s analysis (2001-2011) is only 4.36%. But look at Sub-Saharan African nations and inflation is astoundingly high in contrast to Southeast and East Asian nations. So something else is driving this gap between nominal prices and real prices – likely the hoarding (or restricting exports) and market interventions by speculators and governments.

Lester Brown: “Ever since agriculture began, carryover stocks of grain have been the most basic indicator of food security. The goal of farmers everywhere is to produce enough grain not just to make it to the next harvest, but to do so with a comfortable margin.”

Analysis: In essence, this is true. However, we need to get a sense of the overall idea of where this stems from. First, not everyone eats the grain we were producing in the US. Yet Lester’s section on ‘A History of Food Abundance’ assumes a Western or US-centric view of food. He will also make you believe that we are entering a period of scarcity, which we are not. A decrease of carryover stock from 107 days to 74 days means that we still have plenty of food available! Are we forgetting how much food is wasted? Tristram Stuart discusses in the TED video below some graphs which are alarming.

Most countries produce anywhere from 150% to 200% of their human intake of food needs; and if we factor in livestock and biofuels, that figure rises to 300% to 400% of food supply available for consumption (see here for scarcity vs. distribution debate). Add in the inefficiencies (such as developing country ag inefficiencies like cold storage, grain storage, crates, etc., livestock feed, and actual food waste) and we see that we only have about 40% of our total food produced available for consumption. So the arguments of moving from food abundance to scarcity are based on Malthusian fears resurfacing after being discounted soon after his claims were made (see page 8 here). The reality is that famine, the real word for hunger (not food insecurity), has been decreasing and affecting less people since Malthus’ day. (Eduardo Porter is trying to bring back those fears)

Returning to the US-centric view, Public Law 480 (PL 480) titled the US Food for Peace legislation was enacted in 1954 to act as a market maker. It states that “sales are intended to give special consideration to the development and expansion of foreign markets for the US agricultural commodities and to assure that the US obtains a fair share of any increases in commercial purchases of agricultural commodities by the purchasing government.” It was noted that the program was not to be used “…as a method of getting rid of the surpluses we already have on hand.” Yet on the global stage this is a dumping program at the same time it is a market expansion one.

Another important economic aspect that must be factored in is the current movement to consume ‘locally’, creating demand for food within a reasonable distance from the consumer. By restricting exports, firms are capturing this value by redirecting their goods to local markets and not the global stage. What began as a protectionist policy in fact turned into a market opportunity for firms.

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It is important to note that if we are to address the challenges of food today, we have to make sure our analysis is as close as possible to reality, so that the solutions we derive can actually apply to our circumstances today. And this by no means undermines the human experience of hunger and economic pressures faced by families’ everyday as they decide between food and human capital investments – a choice no human should have to face with the abundance of food on this planet.